Breakouts In Below-Normal Trade Can Work If Conditions Are Right.(B)(INVESTOR'S CORNER)

Byline: KATHARINE STALTER

Big volume on the breakout. That's one of the key signs that CAN SLIM investors know to watch for.

"The best way to measure a stock's supply and demand is by watching its daily trading volume. When a stock pulls back in price, you want to see volume dry up, indicating no significant selling pressure," IBD founder William O'Neil wrote in "How to Make Money in Stocks." "When it rallies up in price, you want to see volume rise, which usually represents institutional buying."

O'Neil goes on to describe the importance of heavy turnover at a stock's breakout point: "When a stock breaks out of a price consolidation area, trading volume should be at least 50% above normal."

Volume means the institutional investors are supporting a stock, buying into it when conditions are right. That is, as it clears its ideal buy point when it sports strong sales and earnings growth, and when it's among leaders in its industry or part of a top industry group.

Sometimes volume at the time of breakout spikes as high as 500% or 1,000% above what's normal.

On rare occasions, a stock may break out in average or below-average trade. In those instances, the breakout can succeed despite the low volume. But the big investors have to come in quickly for that to happen.